GST On LIC Premium in 2019 – “Change is just constant,” they say. Change in one thing that affects the other. The 3% increase in GST is having a negative impact on the insurance premium. This article serves as a guide to increasing GST and its impact on your insurance premium.


gst on lic premium


What Is GST?

The Goods and Services Tax, better known as GST, is a reform of the indirect tax plan of our government. On August 8, 2016, the long-awaited GST Law was passed in Lok Sabha.

This was possible after a very long journey involving pitfalls, confrontations and more. Finally, the GST Bill has entered the implementation phase, which was entered into force on 1 July 2017. The GST would change the tax structure between the centre and the state.

GST is a VAT that eliminates the cascade effect / double taxation of real estate prices and services along the value chain. This would certainly affect the incidence, structure and calculation of indirect taxes, which would lead to a complete renewal of the current tax system in India.

The latest version of GST should be frozen at 18% under the update. This is bad news for all insured as this increase will have a negative impact on the insurance sector, generally in terms of insurance premiums.

Life insurance coverage in India rose from 4.6% in 2009 to 2.6% in 2016. This reflects no growth in recent years. Increasing the GST by 15% to 18% would increase the purchase premium for new insurance policies and the renewal of an existing insurance policy.



The Premium Deciding Factor

Basically, the deciding factor for an insurance premium depends on the type of plan you plan to buy. On this basis, we have two broad categories of insurance policies – life insurance and general insurance.


Also Read: LIC Jeevan Anand


GST On LIC Life Insurance Premium

  • A contract between a person and an insurer, a Life insurance policy insures a nominee with the death of the holder for a premium.
  • Life insurance policies are divided into four categories: Term plans, Pension plans, ULIPs, and Endowment plans.
  • The service tax levied on these various insurance instruments is also different. A term plan provides a death benefit and is defined as a risk-free plan.
  • The candidate receives the sum insured if the insured person dies during the term of the policy. The policyholder does not receive a term payment in a basic plan.
  • Some Term plans offer Return Of Benefits (TROB). The premium component of a futures contract primarily includes the risk component to provide term coverage to an insured person while the policy is active.
  • ULIP and funded plans offer cover and maturity in terms of death, whichever comes first. These plans calculate the investment and risk in the premium element and make these plans more expensive compared to a futures plan.

Also Read: LIC India Premium Calculator


Impact Of GST On LIC Premium

  • After the introduction of GST, insurance plans, including life, car and health insurance, would become more expensive as taxes would be increased.

Term Plan

  • So far, a service tax of 15% has been applied to the term plan premium. Once the update is implemented, the tax would increase by 3% and be 18%.
  • Individuals purchasing insurance plans for the first time or renewing their existing insurance policies must pay 18% GST.

Also Read: LIC Term Insurance 1 Crore


Endowment Plans

  • Endowment plans are considered one of the traditional insurance savings plans. To date, these plans have resulted in a service tax of 3.75% on the insurance premium when an insurance plan is taken out.
  • Now, under the new tax system, it would rise to 4.5%. Insured persons are now expected to pay a service tax of 2.25% on the premium payment for their or their endowment plans when they renew for the second time.

Health Plans

The health insurance policies (individual insurance policies as well as Family Health Insurance ) charged a service tax of 15%. Once the GST update was implemented, health plans are more expensive.

Eg Mediclaim policy for the elderly. The tax system increased by 3%, which would mean 18% of the premium amount since 1 July 2017.

Travel Insurance

Anyone who wants to travel abroad soon has to pay an additional 3% tax, as the new GST has come into effect on July 1st.

The customer now pays 18% GST instead of the previously applicable 15% service tax.

Automobile Insurance

The motor insurance premium includes 15% service tax. If the tax rate is locked to this percentage, it will be increased to 18%.

If you are a fan of Heart fan / Lovers of your car it’s better to sign up for your policy with car insurance so you can save your money & plan to travel somewhere with your family.


Also Read: LIC Policy Maturity Calculator


The Relationship between the GST Rule and Life Insurance Business

According to the GST rules, the value of the service for which GST is charged in life insurance must be following.

  1. The gross premium is reduced by the amount allocated for the insured person’s savings or investments.
  2. In the case of annual insurance with a one-time premium, the policyholder will be charged 10% of the one-time premium.
  3. In other cases, 25% of the premium will be charged for the first year and 12.5% ​​of the premium for future years. For example, if the premium of an endowment plan is 100 Rupees, while the GST of 18% is deducted from the 25% premium (that is 25 Rupees), the GST is 4.50 Rupees.
  4. If the total premium paid by the policyholder is equal to the life insurance coverage, only the 18% GST will be deducted from the total premium.

Also Read: LIC Jeevan Labh


Due to the increase in the percentage of GSTs waiting to be deployed. The overall impact of GST would be higher expenditure (premium and GST increase) for term insurance and endowment plans.

  • Insured persons have the opportunity to benefit if insurers receive a green signal regarding the benefit of the input tax credit.
  • Unfortunately, this is currently not clear, as the structure of the GST center/state is very complex. This could create confusion and compliance for policyholders and increase insurers’ administrative costs.
  • Irrespective of price increases or decreases, if insurance buyers are unsure whether the GST will be updated, market solvency and financial strength will be affected.
  • The primary insurance industry is also affected. Total spending on health, auto, and various non-life projects would increase by 3%.
  • Insurance buyers now should pay reduced prices after the introduction of the GST. For example, the insurance premium for a futures plan was Rs. 10,000 (excluding 15% service tax), the updated GST increases the premium including Rs. 300, Taxes of Rs. 11,500 is being changed to Rs. 11,800.
  • If you compare insurance premiums watch out especially for long-term contracts, insist that different insurers consider premiums that include or exclude GST.
  • The selection process should not change as the effects of GST are the same for all insurers. Follow a suitable selection procedure to get the right insurance plan that will give you maximum protection and meet your insurance expectations.

Also Read: LIC Pension Plan


FAQ- GST On LIC Premium

Que.1 Do we have to pay the GST for the LIC premium?

Ans. Individuals purchasing insurance plans for the first time or renewing their existing insurance policies must pay 18% GST. This means that for the payment of 100 rupees (on the premium) a service tax of 15 rupees has been charged, which is now 18 rupees according to the updated tax plan.

Que.2 What is the GST rate for the insurance premium?

Ans. The GST rate is also 18% for general insurance. For insured persons, the non-life insurance premium increases when the tax increases from 15 to 18%. Traders who have taken out property-casualty insurance can claim a pre-tax credit on the GST paid in their policy (this premium was even offered to them with the service tax).

Que.3 Why is there GST for insurance premiums?

Ans. The immediate impact of the GST would, therefore, be the higher cost (premium plus GST) in the timetables and in the personnel plans due to the increase in the tax rate for insurance following the introduction of the GST. Implementation of the GST. … Insured persons can only benefit if insurance companies benefit from the input tax credit

Que.4 Can you claim the GST for insurance?

Ans. Based on the answer “yes”, you can claim the amount of the GST you have paid for your car insurance if you meet the following conditions. The car is used for official purposes and is registered under a different company name and used for the same reason.

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